South32 (ASX:S32) is poised to generate strong cash flow in the fourth quarter, helped by robust commodity prices and inventory sales, despite operational disruptions due to adverse weather conditions, Jefferies said in a note on Wednesday.
The investment firm had previously expected some working capital unwind in the third quarter, but a higher impact is now expected in the June quarter due to strengthening commodity markets.
The miner reported a 6% quarter-on-quarter decline in alumina production of 1.2 million tonnes, missing Jefferies' forecast of around 1.3 million tonnes. Its GEMCO sales, which beat market expectations, also came in roughly 2% below Jefferies' estimates.
Analysts at the firm see risk in the Hermosa project timing and capital expenditure update ahead of the company's second-half review.
Jefferies maintained a buy rating on South 32 and increased the price target to AU$5.25 from AU$5.20.